sábado, diciembre 15, 2012

Canada in 2013: It’s all about the oil

Editor’s note: Jonathan Kay is the Managing Editor for Comment at
Canada’s National Post newspaper and a fellow at the Washington,
D.C.-based Foundation for Defense of Democracies. Follow him @jonkay.
The views expressed are his own.

Canada is in a fortunate position relative to other developed Western
nations. Our government is stable. Our budget deficit is small. Our
real estate market is healthy (if somewhat overheated). And unemployment
is relatively low. Only the occasional flourish of Quebec separatism
keeps things lively in the Great White North. The biggest challenge my
country will face in 2013 – and for many years after that – will be the
problem of plenty. Specifically, how will Canada manage its large and
growing oil wealth?

Canada currently produces just over 3 million barrels of oil per day (b/d), making us the world’s 7th
largest producer, and the single largest supplier of oil imports to the
U.S. market. Thanks to the ongoing expansion of Alberta's oil sands,
production is expected to more than double by 2030, to 6.2-million b/d,
transforming Canadian into an energy superpower.

But there is a problem: The vast
majority of the country’s oil wealth is landlocked in northern Alberta.
And the existing pipeline network, which connects the large Canadian
hubs at Edmonton and Hardisty, Alberta to the main American terminals in
Oklahoma and Illinois, is inadequate. Half of America’s 18 million b/d
refining capacity sits on or near the Gulf Coast. But barely any
Canadian oil gets there (in part because of America's own oil pipeline
bottleneck at Cushing, Oklahoma).

For this reason, in 2013, Canada’s government and oil producers will
be making a big push for U.S. President Barack Obama to reconsider the Keystone XL pipeline project, which could bring 830,000 b/d from Hardisty, Alberta to Steele City, Nebraska.

Perhaps more important for Canadian producers, in the long run, is the massive and growing Asian market.

China’s net oil imports are projected to double between now and 2030,
from 5.7 million to more than 12 million b/d. India's net imports,
likewise, will grow from about 3 million to about 6 million b/d. Yet
despite the spider web of pipelines that cover the North American
Midwest, there is just a single oil route to the west coast from Alberta
– the 300,000 b/d Kinder Morgan Trans Mountain Pipeline, leading to
Vancouver and Puget Sound.

And so an important challenge for Canada in 2013 and beyond will be
to move forward on pipeline projects that expand our access to Asian
markets, including both a possible expansion of the Trans Mountain
pipeline (bringing capacity up to 750,000 b/d), and a completely new 36"
diameter, 730-mile pipeline called the Enbridge Northern Gateway, which
eventually could transport as much as 850,000 b/d of diluted Alberta
bitumen to a new marine terminal near Kitimat, British Columbia, for
sale to Asian markets.

Construction of the Northern Gateway pipeline would provide a huge
boost to the Canadian oil industry. But its chances of going ahead in
its currently planned form in 2013 are very slim, for a variety of very
all-too Canadian reasons – including bickering involving the federal and
British Columbia government over revenues, massive opposition from
aboriginal bands, and an extremely effective anti-pipeline campaign
mounted by British Columbia's powerful environmental lobby. In fact,
many analysts believe the pipeline will never get built, leaving
Canadian oil producers largely hostage to the American energy market.

Stresses are appearing in Canadian public life not only over the
question of what to do with our oil, but also over what to do with the
money we earn from it.

Thanks to Canada’s “equalization” policy, billions of dollars are
shuttled (indirectly) from the country’s richest provinces to its
poorest on an annual basis. In recent years, this has meant that
oil-rich Alberta (per capita GDP = about $78,000) generously subsidizes
the welfare-state policies of an out-at-the-elbows Quebec (per capita
GDP = about $43,000). This has created no small measure of rancor in the
country, especially because Quebec's left-wing, environmentalist
politicians have made a habit of attacking Alberta’s oil industry for
its pollution and contribution to global warming, essentially biting the
hand that feeds them.

At one point in 2012, Canada’s leading opposition politician, Thomas
Mulcair (who is from Quebec), even declared that the oil sands were
giving Canada a case of what economists call “Dutch Disease,” whereby
high priced commodity exports cause the Canadian dollar to appreciate,
thereby rendering our manufacturing industries uncompetitive in global
markets. The remark was front page news for days, and continues to stick
in the craw of many Albertans.

All in all, managing the oil file will be Canada's biggest challenge
in 2013. Like a family that has won the lottery, we Canadians are
delighted by our newfound wealth. But turning it into useful income has
become unexpectedly problematic, due to our geography, fractured
political landscape, troubled historical relationship with First
Nations, and environmental focus. The fight between our squabbling
regions and constituencies over the best way to proceed has only just
begun.

"You do not really understand something unless you can explain it to your grandmother" - Albert Einstein

"It is inaccurate to say I hate everything. I am strongly in favor of common sense, common honesty, and common decency. This makes me forever ineligible for public office" - H. L. Menken

"I swore never to be silent whenever and wherever human beings endure suffering and humiliation. We must always take sides. Neutrality helps the oppressor, never the victim. Silence encourages the tormentor, never the tormented" -Elie Wiesel

"Stay hungry, stay foolish" - Steve Jobs

"If you put the federal government in charge of the Sahara Desert , in five years ther'ed be a shortage of sand" - Milton Friedman

"The tragedy of modern man is not that he knows less and less about the meaning of his own life, but that it bothers him less and less" - Vaclav Havel